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Philippines: Current account deficit seen worsening over 2 years
MANILA, Philippines — DBS Bank Ltd. of Singapore expects the country’s external balance to worsen over the next two years with the current account (CA) deficit breaching one percent of the domestic output.
Gundy Cahyadi, economist at DBS, said the country’s current account shortfall would widen to 1.1 percent of gross domestic product in 2018 and further to 1.3 percent of GDP in 2019 from the projected 0.7 percent this year.
“Depreciation pressure on the peso is likely to persist, as we expect the external balance to worsen,” he said.
The peso has emerged as the worst performing currency in the region, depreciating close to two percent year-to-date as it weakened to 51 to $1 a few months ago, hitting a fresh 11-year low of 51.77 to $1 last October.
The CA position is an important indicator of the economy’s health. It is the sum or the balance of trade in goods and services less imports as well as the net income from abroad and net current transfers.
The Bangko Sentral ng Pilipinas (BSP) has revised downward the projected CA deficit to $100 million or 0.1 percent of GDP from the original target of $600 million representing less than 0.1 percent of GDP.
Exports of goods are projected to recover with a growth of 11 percent, an upward adjustment from the five percent growth assumption to reflect the recovery in the global economy.
Meanwhile, the growth forecast for imported goods is retained at a robust rate of 10 percent, supported by the moderate increase in commodity prices and increased imports of raw materials, capital goods and consumer goods.
Latest data from the BSP showed the CA reversed to a surplus of $28 million in the first nine months from a year-ago deficit of $454 million due mainly to increased net receipts in the trade-in-services, and secondary and primary income accounts that negated the widening of the trade-in-goods deficit.
Cahyadi said Fitch Ratings upgraded the country’s credit rating to “BBB” or a notch above minimum investment grade from “BBB-” or minimum investment grade despite the weakening of the peso against the dollar.
Source: http://www.philstar.com/business/2017/12/27/1771990/current-account-deficit-seen-worsening-over-2-years